MPR: Grand Forks Looks for a Place in the Amazon (.com) Jungle

Grand Forks Looks for a Place in the Amazon (.com) Jungle
by Bob Reha
January 13, 2000

Given the excitement - at least on the stock market - over the Amazon.com Internet bookstore, it might seem like a no-brainer for a community to try to encourage a distribution center in its midst. However, when faced with just that possibility the city of Grand Forks is finding there is a lot to debate, and it's becoming a discussion on the city's whole economic future.

AMAZON.COM IS NOT NEW to Grand Forks. The company already has a call center there which deals with phone orders. Late last year, Amazon moved in a big way by buying "Tool Crib", an Internet retailer, which unlike many similar companies mushrooming across the Web, is actually making money. Now Amazon is considering expanding.

John O'Leary is the executive director of the Office of Urban Development in Grand Forks. He says the city has a once-in-a-lifetime opportunity: build a distribution warehouse, perhaps as large as 750,000 square feet for Internet retailer Amazon.com.

O'Leary: What's significant about a distribution center of this size is that it creates the equivalent of 200 new homes in Grand Forks in terms of our tax base.

That's important for the city, which is still rebuilding its economy after the historic flood of 1997. O'Leary says the warehouse is being proposed by the local growth fund, an economic development group supported by a portion of the city's sales tax. If the center is built, the growth fund would be Amazon.com's landlord. O'Leary says this is an opportunity for the city to become an e-commerce player in a rapidly changing larger economy.

O'Leary: We know that e-commerce is going to hemorrhage money off of Main Street, and what we have to do is figure out how to supplant that money with other sources of revenue and we think that you can't fight this; what you have to do is join it.

The warehouse is seen by some as a way to ensure Amazon.com will expand in Grand Forks and create more jobs. Critics worry the project is too optimistic. They point to projections the company will lose $400 million this year. They also point to a letter local bankers sent O'Leary saying they're wary of lending the project money.

O'Leary says the reason for Amazon.com's red ink is it's re-investing its money in expansion, including the purchase of Tool Crib. O'Leary is confident - even in a worse case scenario, with Amazon either leaving, or not arriving in the first place - the project can be a money maker.

O'Leary: Will we have a tough time if the building goes dark re-renting it? I don't think so. Our track record of leasing out spaces that we've already constructed is very good. We don't have any vacancies right now, although we got six- or seven-hundred-thousand square feet in the industrial park that's owned by the job-development authority and leased out to businesses.

O'Leary says since 1988, the economic-development program has undertaken around 100 and has a loan-lost ratio of only five percent, even though most of those projects were new businesses. Still, not everyone is reassured by O'Leary's outlook.

Thompson: With fishing, if you set up your tackle and entire strategy to catch small fish and you go places where small fish are caught, that's what you're going to get - small fish.

David Thompson is a local attorney who opposes the project. He says there hasn't been enough public input on the project. He says he feels as though development officials have been hiding something, and he questions the quality of the potential jobs the project would bring to town.

Thompson: If we're going to spend a lot of money to bring someone in here to provide jobs, and we're going to pay millions of dollars to that entity to generate jobs and develop them, then those jobs ought to be real good jobs. They ought to be $15 to $20-an-hour jobs.

In response, Doug Carpenter, who chairs the Grand Forks Growth Fund, says he'd like to see a plethora of high-paying jobs as well. But Carpenter, who is also president of the Grand Forks City Council, says some of the jobs will pay $7 to $9 an hour.

Carpenter: That's a beginning wage with benefits which will move up, actually some of them very quickly plus benefits.

Carpenter says part of the reason there's little information about the project is no proposals have been made yet. He says another reason details have been kept under wraps, is changes in business practices he says are being brought on by the Internet.

Carpenter: Anything that's publicly discussed very quickly gets disseminated, and all of a sudden you've got 50,000 to 100,000 communities across the United States saying, "We we want a piece of this too; we want 1,000 jobs in our community."

Another issue is no one knows the project's likely price tag. City council member Bob Brooks says he's concerned the public involvement in the distribution center could stifle other projects.

Brooks: Economic development is very important there, but if we put all of our dollars into one project that's going to pretty much limit or eliminate or limit what we can do to bring businesses to Grand Forks, and that's where my concern.

The issue will come to a head Wednesday. That's the deadline officials have placed on a request for proposals from firms interested in building the project.

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